Daily Newsletter, Sunday, 8/9/2015

Table of Contents

Leaps Trader Commentary

July Jobs Report Fuels Fear Of Rate Hike

by James Brown

The month of August is known for weak stock market returns. Last week only reinforced this idea. All of the major U.S. indices posted declines. Continued weakness in crude oil pressured energy stocks lower. We saw more evidence of traders selling their winners this year and that knocked the biotech stocks down with a -4.7% loss. Of course a few high-profile earnings misses in the biotech group didn't help matters.

Money was looking for safety and found its way into the bond market, which pushed the yield on the 10-year bond down to 2.18%. It was the fourth weekly decline in a row for bond yields.

The Dow Jones Industrial Average was making headlines on Friday for its seventh down day in a row. That's the longest losing streak since 2011. The S&P 500 has not fared much better with declines in five out of the last six sessions. Nearly all of the market's sectors posted declines.

Commodities continued to sink. The CRB commodity index has broken down below its 2009 bear-market lows. This is starting to generate fears of global deflation. Precious metals almost bucked the down trend with silver posting a very minor gain. Gold didn't quite close positive for the week and thus marked its seventh weekly decline in a row. This is the longest losing streak for gold since 1999. Energy stocks had a rough week with crude oil falling -6.5%. A barrel of oil is down to $43.75. It was the sixth weekly loss in a row for oil. Dollar strength pushes commodities lower and right now the U.S. dollar looks like it's coiling for another bullish breakout higher.

Chart of the CRB commodity index

Chart of Crude Oil

Chart of the Gold ETF (GLD)

Chart of the U.S. dollar

Economic Data

It was a busy week for economic data. Construction spending for May was revised higher from +0.8% to +1.8%. June's construction spending only rose +0.1%. The ISM manufacturing index declined from 53.5 in June to 52.7 in July. This missed estimates for a rise to 53.7. The ISM non-manufacturing (services) index improved from 56.0 in June to 60.3 in July. July's ISM non-manufacturing number marked the 66th consecutive month of growth (readings above 50.0) and marked the highest reading since August 2005.

The ADP National Employment Report said private businesses added +185,000 jobs in July. Their June report was adjusted lower from +237K to +229K. This may have generated some worry over the government's nonfarm payroll report on Friday.

Depending on who you asked economists were estimating July job growth in the 215K-220K-225K range. The official number came in at +215,000. June's job report was adjusted from +223K to +231K while May's was adjusted higher from +254K to +260K. The average jobs report is now above 200,000, which is what the Federal Reserve wanted to see. The three-month average is even higher at +235K. It was the impact this jobs report might have on the Fed's decision that fueled market weakness. The July number was considered good enough for the Fed to raise rates in September.

Markets continue to ignore the terrible participation rates. There is a record 93,770,000 Americans not in the workforce. The Labor force participation rate fell back to a 38-year low at 62.6%. The headline unemployment rate was unchanged at 5.3%, a seven-year low.

Joe LaVorgna, chief U.S. economist at Deutsche Bank, said, "If the labor market continues to generate 200K+ jobs per month, the unemployment rate will break 5% by yearend." Joe was quoted on the Wall Street Journal's website on Friday. He went on to say the continued strength in the job market is probably the main reason the Federal Reserve wants to raise rates this year.

The Fed Funds Futures rate is showing a 60% chance of a 25 basis point rate hike in September. Citigroup analyst Steven Englandar believes it is closer to a 75% chance of a September hike. Not everyone agrees. The fact that inflation is so low is seen as a deterrent to the Fed raising rates. There are also conflicting opinions on if the Fed will raise just once in September with a "one and done" attitude or if it will be the beginning of a multi-hike trend over the next six to nine months.

Overseas Economic Data

There was plenty of economic data overseas including some central bank news. The Bank of England left its monetary policy unchanged. England is keeping its main interest rate at 0.5% and leaving its asset buying program at 375 billion pounds. There seems to be a growing camp of policy makers who believe that England is nearing its first rate hike, likely in 2016.

The Reserve Bank of Australia left its rates unchanged at 2.0%. India's central bank also left their rates unchanged, currently at 7.25%. The Bank of Japan left their policy unchanged with their main interest rate at 0.1%. There were no changes to their massive QE program of 80 trillion yen (about $640 billion). A recent Wall Street Journal survey revealed that most economists expect Japan's GDP to fall -2% last quarter.

Germany said their factory orders in June were up +2.0%, which was higher than expected. The country's industrial production in June fell -1.4% for the month. Germany's manufacturing PMI for July improved from 51.5 to 51.8.
France reported their industrial production for June slipped -0.1%, which was worse than expected. French manufacturing PMI was unchanged at 49.6 in July. That's in negative territory. Spain's industrial production for June surged +4.5%, up from +3.4%.

The Eurozone services PMI for July inched higher from 53.8 to 54.0. Numbers above 50.0 are positive. Retail sales in June slipped -0.6% for the month, which was worse than expected. The Eurozone's manufacturing PMI for July improved slightly from 52.2 to 52.4.

Negotiations with Greece continue. Leaders on both sides of the table believe that a deal will be done before Greece has to make a 3.4 billion euro payment to the European Central Bank on August 20th. Meanwhile the Greek stock market reopened after being shut down for five weeks. Monday, August 3rd, was the first day of trading and the Greek market crashed -17%. Greek banks have been crushed with heavy selling the last few days.

Looking East we saw Japan report its manufacturing PMI for July inched lower from 51.4 to 51.2. China's official manufacturing PMI slipped to a five-month low with a drop to 50.0. Their non-manufacturing PMI moved the opposite direction with a rise from 53.8 to 53.9, which is a five-month high. The Chinese Caixin manufacturing PMI reading for July fell from 48.2 down to 47.8. Numbers above 50.0 suggest growth and the manufacturing number is moving the wrong way. The country's economic slowdown is starting to have a bigger impact on businesses around the globe. China is also a big reason commodities are falling because the country's demand is slowing down.

There remains a lot of focus on the Chinese stock market. It was another volatile week for Chinese stocks. A recent news article suggested that one third of all Chinese investors have closed their trading accounts since the market's crash in the last couple of months. The Shanghai index managed a bounce on Friday after the government said they had increased the amount of money to support the stock market up to 1 trillion yuan.

Major Indices:

The large cap S&P 500 index fell -1.25% for the week . That reduces the 2015 year to date gain down to +0.9%. The index pierced what should be technical support at its 200-dma on Friday before paring its losses. In spite of all the volatility, the S&P 500 remains inside its five-month 2,040-2,135 trading range. Unfortunately this is bad news for the long-term up trend, which has seen momentum come to a standstill (see long-term chart below).

Until we see the S&P 500 break out one way or the other from its trading range it's going to be tough picking a stock market direction. On a short-term basis the market looks weak. We could see the S&P 500 fall toward support at the bottom of the range near 2,040.

chart of the S&P 500 index:

Long-term chart of the S&P 500 index:

The NASDAQ composite was hammered on Thursday, which produced most of last week's -1.65% decline. The index managed to trim its losses on Friday but like the S&P 500 the NASDAQ is down five out of the last six days. We could look for support near the 5,000 mark but I'd focus on the 4,900 level, which is probably stronger support and it's bolstered by the simple 200-dma. Year to date the NASDAQ is up +6.1%.

chart of the NASDAQ Composite index:

Weekly chart of the NASDAQ Composite index:

The small cap Russell 2000 index underperformed its big cap rivals with a -2.57% decline last week. This index hit new five-month lows on Friday before paring its losses. We should keep an eye on support near 1,200. A breakdown below 1,200 could be a very bearish signal for the broader market. Year to date the $RUT is only up +0.2%.

chart of the Russell 2000 index

Weekly chart of the Russell 2000 index

Economic Data & Event Calendar

After last week's rush of data the week ahead looks quiet. We'll get the U.S. PPI on Friday, which provides a glance at inflation on a wholesale level. Friday also brings the latest Eurozone GDP estimate.

Looking ahead we are going to hear more about the commodity breakdown. Plunging commodity prices suggest slowing inflation at best and deflation at worst. Bill Gross, who used to run PIMCO, believes that the world is "dangerously close to deflationary growth".

While we are on the topic of slow growth the Atlanta Fed updated their forecast for U.S. Q3 GDP growth. These guys have been dead on with their Q1 and Q2 estimates. Right now they are expecting Q3 GDP growth of just +1%. That's down from +2.3% in the second quarter. Meanwhile Wall Street economists are expecting +3.2% Q3 growth, which seems awfully optimistic.

Optimism is one thing investors are severely lacking right now. The weekly AAII investor sentiment survey did see bullish sentiment improve +3.2% midweek but it's only at 24.3%. That's the 19th week in a row bullish sentiment has been below the long-term average of 38%. Bearish sentiment fell -9% to 31.7% while neutral sentiment rose 5.8% to 44.0%, which is extremely high. The long-term average for neutral sentiment is 30.9%. This survey took place before Thursday's drop and before Friday's payroll number. We could see bearish sentiment rise in next week's survey.

All week long investors were looking ahead to Friday's job report. July's jobs number above 200,000 was considered good enough for the Fed to go ahead and raise rates in September. This sparked selling pressure across the market on Friday morning. Naturally one might wonder if we are poised for another taper tantrum.
The last time investors were worried the Fed might raise rates too soon the stock market saw a painful pullback.

There are plenty of arguments on both sides to raise or not raise rates. Several months of +200,000 job growth is one reason to raise rates. Yet +1% Q3 GDP growth seems like a reason to wait. Plus we have both the International Monetary Fund (IMF) and the World Bank asking the Federal Reserve to postpone any rate hikes until next year to prevent hurting an already weak global economy. The Fed is worried that the U.S. is due for a recession and they don't have any bullets left in their gun. They want to raise rates (reload the gun) so they have some ammunition ready for the next recession.

You already know that August and September tend to be weak months for stock market performance. Volume also tends to go down in August as stock market participants cram in their last bit of summer vacation before school starts for their children. I suspect that investors could choose to step away from the stock market and just sit on the sidelines and wait until the September FOMC meeting. The market's breadth has not improved either, which is just one more reason to be cautious.

New Plays

A Successful Week for Entry Points

by James Brown

CVS, DIS, and MSFT all hit our entry triggers to launch positions. Even CLX broke out higher as expected. Unfortunately shares of CLX actually moved too fast for us and did not meet our entry point qualifications.

This week I am not adding any new plays tonight. The market's weakness and inability to build on its rally attempts generates worry about the strength of the market. We already know that market internals are weak and only a handful of big cap names have kept the market aloft.

That does not mean there are no opportunities. Tonight I have completely refreshed the watch list. We have new candidates with AMBA, CELG, STZ, and V.

Closed Plays

Play Updates

Comments: 08/09/15:
ADBE displayed relative strength and managed a gain for the week. Traders bought the dip on Friday near some short-term technical support (5 & 10 dma). Shares look poised to re-challenge resistance in the $84.00 area.

FYI: ADBE has earnings coming up in mid September.

Trade Description: May 3, 2015:
ADBE is in the technology sector. According to the company's website,
"Adobe is changing the world through digital experiences. Content built and optimized with Adobe products is everywhere you look â€” from websites, video games, and smartphones to televisions, tablets, and beyond. AdobeÂ® Creative CloudÂ® software offers the most innovative tools for creating digital media, while Adobe Marketing Cloud delivers groundbreaking solutions for data-driven marketing. Our leadership in these two emerging categories, Digital Media and Digital Marketing, provides our customers with a real competitive advantage, positioning Adobe for continued growth well into the future.
As one of the largest software companies in the world, Adobe achieved revenue of more than US$4 billion in 2013."

The company's most recent earnings report was March 17th. Results were $0.44 a share, which was five cents better than expected. Revenues were up +10.9% to $1.11 billion, also above expectations. The company continues to see success with their subscription model and added 517,000 new creative cloud subscriptions, a +28% improvement from a year ago.

Technically the stock is in a long-term up trend. Shares just spent the last few weeks consolidating sideways and looks ready for the next move higher. A rise past $78.00 would generate a new buy signal on the point & figure chart.

I am suggesting we wait for ADBE to close above $77.75 and then buy calls the next morning with a stop loss at $71.85. More conservative investors may want to wait for ADBE to close over short-term resistance at $80.00 as an alternative entry point for bullish positions.

Current Target: To Be Determined
Current Stop loss: 77.65
Play Entered on: 05/15/15
Originally listed on the Watch List: 05/03/15

Activision Blizzard, Inc. - ATVI - close: 28.78

Comments: 08/09/15:
ATVI was a big winner last week thanks to its earnings report. The company announced its Q2 results on August 4th. Analysts were expecting a profit of $0.08 per share on revenues of $666.6 million. ATVI beat estimates with a profit of $0.13 per share. Revenues were up +15% to $759 million. Management raised their 2015 earnings guidance above Wall Street estimates.

The stock soared on this report with a breakout past its 2015 highs. Multiple analyst firms have raised their price target on ATVI into the $30-33 range. Shares managed to hold up very well during the market sell-off on Thursday.

I would expect ATVI to see profit taking if the broader market continues to sink.

This is a long-term trade with the 2017 calls. We're going to keep our stop loss relatively wide. Tonight we'll adjust the stop up to $24.90.

No new positions at this time.

Trade Description: May 24, 2015:
Consumer spend more money on video games than they do at the movie theater. ATVI is the biggest with annual sales of $4.58 billion. Electronic Arts (EA) is hot on its heels with revenues of $4.52 billion a year.

ATVI is home to some of the biggest franchises in video game history. According to the company, "Activision Blizzard, Inc. is the largest and most profitable western interactive entertainment publishing company. It develops and publishes some of the most successful and beloved entertainment franchises in any medium, including Call of Duty , Call of Duty Online, Destiny , Skylanders, World of Warcraft , StarCraft , Diablo, and Hearthstone: Heroes of Warcraft. Headquartered in Santa Monica, California, it maintains operations throughout the United States, Europe, and Asia. Activision Blizzard develops and publishes games on all leading interactive platforms and its games are available in most countries around the world."

Investors have been pretty forgiving when it comes to ATVI's recent earnings reports. On February 5th they beat the bottom line estimate but missed the revenue number. Revenues were down -2.6% from a year ago. ATVI blamed currency headwinds for the revenue miss since half of their sales are outside the U.S. and represent a significant chunk of their profits. Plus, the video game business is prone to lumpy quarters as sales rise and fall on new releases and expansions. Management lowered their Q1 and 2015 guidance.

ATVI just reported its Q1 results on May 6th. Earnings per share fell -15.7% from a year ago to $0.16 but that was actually 9 cents better than expected. Revenues fell again, this time down -8.9%. Management lowered their Q2 guidance but they raised their fiscal 2015 earnings guidance above Wall Street estimates. That was enough to send shares of ATVI higher. A few analysts have commented that ATVI's 2015 guidance is too conservative.

Bobby Kotick, Chief Executive Officer of Activision Blizzard, commented on his company's quarterly results, "...This deepening level of engagement with a widening base of players across our franchises is what drove another successful quarter. We delivered better-than-expected Q1 results, increased our 2015 non-GAAP revenue outlook to $4.425 billion and earnings per share outlook to $1.20. Last quarter, on a non-GAAP basis, we delivered record higher-margin digital revenues of over half a billion dollars a Q1 record on an absolute basis and an all-time high on a percentage basis."

There were a number of headlines about how ATVI's Warcraft MMORPG saw its subscriber numbers fall from 10 million to 7.1 million in the last quarter. Investors don't seem to care. The Warcraft game is a cash cow but it's 11 years old. Investors could be looking forward.

ATVI said their new Destiny sci-fi shooter game and the Blizzard's fantasy card game have more than 50 million registered players (between them) with over $1 billion in sales.

ATVI also has several new titles coming out. They're on the verge of releasing "Heroes of the Storm", which will take on the current category champion "League of Legends" for the MOBA-style video game. More than ten million people have already signed up for the Heroes beta. ATVI has announced the next iteration of their Call of Duty franchise (CoD), which will be "Call of Duty: Black Ops III", which is another major cash-generating franchise. ATVI is also launching a new game called "Overwatch" and they'll release a new version of "Guitar Hero", which had 40 million players at its peak.

Currently shares of ATVI are up three weeks in a row and look a little bit overbought. Broken resistance near $24.00 should be significant support. Tonight I am suggesting a buy-the-dip trigger at $24.25 with a stop loss at $21.85.

08/09/15 new stop @ 24.90
08/04/15 ATVI beats estimates on both the top and bottom line and raises guidance.
07/21/15 Trade begins. ATVI opens at $26.25
07/20/15 ATVI closed @ $26.25, above our trigger of $26.15
07/12/15 new entry strategy: Wait for a close above $26.15, then buy calls
Use the 2017 Jan $30 call
06/28/15 adjust the entry trigger to $23.75 and the stop to $21.85.
06/21/15 move the stop loss to $22.85
Option Format: symbol-year-month-day-call-strike

Current Target: To Be Determined
Current Stop loss: 24.90
Play Entered on: 07/21/15
Originally listed on the Watch List: 05/24/15

CVS Health - CVS - close: 107.74

Comments: 08/09/15:
CVS is a watch list candidate that has graduated to our active play list.

The plan was to buy calls on a dip at $107.00. We were expecting some profit taking when CVS reported earnings on August 4th. The company delivered Q2 earnings of $1.19 per share, which were six cents above estimates. Revenues were up +7.4% to $37.17 billion, which was in-line with expectations. CVS raised their 2015 guidance above Wall Street estimates. Yet the stock sold off anyway. Shares gapped open lower at $110.74 and spiked down to $106.56. Our trigger was hit at $107.00. Since then the intraday bounce in CVS has failed and shares are once again testing the $107 area.

Technically last week's decline has produced a potential bearish reversal pattern on the weekly chart but it needs to see confirmation.

Nimble investors may want to consider buying calls on dips in the $105-106 area but I am not suggesting new positions at this time.

Trade Description: July 19, 2015:
Healthcare stocks have been strong performers this year. CVS is no exception with the stock up +14% year to date.

According to the company, "CVS Health is a pharmacy innovation company helping people on their path to better health. Through its 7,800 retail pharmacies, nearly 1,000 walk-in medical clinics, a leading pharmacy benefits manager with more than 70 million plan members, and expanding specialty pharmacy services, the company enables people, businesses and communities to manage health in more affordable, effective ways. This unique integrated model increases access to quality care, delivers better health outcomes and lowers overall health care costs."

Their most recent earnings report was May 1st. CVS announced its Q1 results were $1.14 per share. That beat estimates by six cents. Revenues were up +11% to $36.33 billion, also above estimates. CVS did lower their Q2 guidance but left their 2015 forecast unchanged.

Wall Street loves a deal and CVS has been busy making deals. On May 21st the company announced they were buying Omnicare (OCR) for $12.7 billion. OCR is a pharmacy benefits provider to seniors citizens. This deal is expected to close by the end of 2015. CVS believes OCR will add 20 cents in earnings to their fiscal 2016. CVS CEO Larry Merlo commented on the deal, "The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel. It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of seniors and chronic care patients."

CVS didn't stop there. On June 15th they announced a deal to buy all of the pharmacies inside Target stores (TGT). Here's an excerpt from the company's press release explaining the Target pharmacy deal:

CVS Health to acquire Target's pharmacy and clinic businesses for approximately $1.9 billion. Through this agreement, CVS Health will acquire Target's more than 1,660 pharmacies across 47 states and operate them through a store-within-a-store format, branded as CVS/pharmacy. In addition, a CVS/pharmacy will be included in all new Target stores that offer pharmacy services. Target's nearly 80 clinic locations will be rebranded as MinuteClinic, and CVS Health will open up to 20 new clinics in Target stores within three years of the close of the transaction. The new clinics will be part of CVS/minuteclinic's plan to operate 1,500 clinics by 2017. In addition, CVS Health and Target plan to develop five to 10 small, flexible format stores over a two-year period following the deal close, which will each be branded as TargetExpress and include a CVS/pharmacy.

Wall Street also reacted positively to the Target pharmacy news.

Rival pharmacy operator WBA reported earnings on July 9th that beat estimates by 15 cents and WBA raised their guidance. That should bode well for CVS who reports earnings on August 4th.

Shares of CVS are trading at all-time highs near $110. We don't want to chase it here. Tonight I am listing a buy-the-dip entry trigger to jump in on a pullback. Prior to the July rally the June high was $106.88. I'm suggesting a buy-the-dip trigger at $107.00.

Current Target: To Be Determined
Current Stop loss: 103.40
Play Entered on: 08/04/15
Originally listed on the Watch List: 07/19/15

Dunkin' Brands Group - DNKN - close: 53.35

Comments: 08/09/15:
DNKN lost about half a point for the week. The rally on Monday failed the very next day. Sadly this looks like a new lower high and doesn't bode well for DNKN on a short-term basis. If the market continues to sink we could see DNKN fall toward $52.00 and that puts this trade in danger of being stopped out (current stop is $51.85).

No new positions at this time.

Trade Description: May 31, 2015:
Investors appear to be in the mood for donuts this year. Shares of DNKN are significantly outperforming the broader market with its stock up about +26% year to date versus the S&P 500's +2.3% gain.

The company is in the services sector. According to the company, "Founded in 1950, Dunkin' Donuts is America's favorite all-day, everyday stop for coffee and baked goods. Dunkin' Donuts is a market leader in the hot regular/decaf/flavored coffee, iced coffee, donut, bagel and muffin categories. Dunkin' Donuts has earned the No. 1 ranking for customer loyalty in the coffee category by Brand Keys for nine years running. The company has more than 11,300 restaurants in 37 countries worldwide. Based in Canton, Mass., Dunkin' Donuts is part of the Dunkin' Brands Group, Inc. (DNKN) family of companies."

DNKN also owns the Baskin Robbins franchise, which has more than 7,500 retail locations in almost 50 countries.

The company seems to be undergoing a turnaround in its earnings results.
Back in December shares plunged on an earnings warning when management lowered their 2015 guidance.
When they reported their Q4 results in February they missed by a penny with revenues in-line (+5.5%). Their donut store comps were +1.4% but their ice cream store comps were +9.3%. Management raised their dividend +15% and announced a $700 million stock buy back program.

Results improved significantly in the first quarter of 2015. Analysts were expecting a profit of $0.35 a share on revenues of $180.7 million. DNKN reported earnings of $0.40 a share, which is a +21% improvement from a year ago. Margins improved 310 basis points to 47.1%. Their revenues rose +8.1% to $185.9 million, above estimates. Their donut store comps improved to +2.7% while their ice cream store comps hit +8.0%. Management raised their 2015 earnings estimates above Wall Street's consensus.

The stock soared to new all-time highs following this earnings report in late April. Since then shares have seen a correction but investors have bought the dip. Analysts have begun to raise their price targets. The point & figure chart is very bullish with a long-term target of $78.00. Currently shares of DNKN are hovering below resistance in the $54.00 area. Tonight I am suggesting we wait for DNKN to close above $54.25 and buy calls the next morning.

Current Target: To Be Determined
Current Stop loss: 51.85
Play Entered on: 06/24/15
Originally listed on the Watch List: 05/31/15

Facebook, Inc. - FB - close: 94.30

Comments: 08/09/15:
With a show of strength on Wednesday it looked like FB was ready to breakout higher. Then the market reversed sharply lower on Thursday and FB along with it. The stock's move on Thursday produced a bearish engulfing candlestick reversal pattern. I'm worried shares could be headed toward $90.00 if the broader market continues to sink.

No new positions at this time.

Earlier Comments: March 22, 2015:
Facebook probably needs no introduction. It's the largest social media platform on the planet. As of December 31st, 2014 the company reported 1.19 billion monthly active users and 890 million daily active users. If FB were a country that probably puts them as the third most populous country on the planet (behind India and China).

This past week the company announced a new mobile payment service through FB's messenger app. The new service will compete with similar programs through PayPal, Apple Pay, and Google Wallet.

The announcement combined with a broad market rally helped fuel a +7% gain in FB's stock last week. FB's market cap has risen past $230 billion making it the tenth largest company in the S&P 500.

Growth has been phenomenal. According to IBD, FB's Q4 earnings were up +69% form a year ago. Revenues were up +49%. Wall Street is expecting FB's profit to rise +12% in 2015 and +32% in 2016.

Technically shares of FB have broken out from a very significant consolidation pattern. The point & figure chart is bullish and forecasting at $96.00 target. I think it will go higher. After a five-day run we do not want to chase it here. I'm suggesting a buy-the-dip entry trigger at $82.00 with a stop loss at $74.75.

Current Target: To Be Determined
Current Stop loss: 88.85
Play Entered on: 04/01/15
Originally listed on the Watch List: 03/22/15

General Dynamics - GD - close: 149.72

Comments: 08/09/15:
GD spent the week churning sideways but managed to eke out a gain anyway. I would hesitate to launch new positions. If the market continues to sink we could see GD decline toward what should be support in the $146.00 area.

No new positions at this time.

Trade Description: July 12, 2015:
The last time we had GD in the newsletter was back in November 2014. Shares have spent the last seven months building a massive consolidation in the $130-146 range. The stock could be poised for a major breakout higher.

GD is considered part of the industrial goods sector. The company is a huge aerospace and defense company. They have four significant segments: aerospace, combat systems, information systems, and marine systems (ships and submarines). The defense industry in the U.S. has been saddled with significant budget cuts due to the 2011 sequestration deal that will shave $500 billion from U.S. defense spending from 2012 through 2021. The industry has managed to thrive in spite of these budget cuts.

The world isn't getting any safer and the major defense contractors have been working on boosting their overseas sales just in case the U.S. decides to cut defense spending again. Considering the current state of world affairs with a growing military rival in China, a new cold war brewing with Russia, and an openly hostile ISIS, defense spending should stay healthy.

I mentioned earlier that GD had consolidated sideways for the last seven months. Today it's on the verge of a bullish breakout higher. The point & figure chart is already bullish and forecasting at $175.00 target.

Friday's intraday high was $146.98. I am suggesting we wait for GD to close above $147.00 and then buy calls the next morning with a stop loss at $141.75.

Current Target: To Be Determined
Current Stop loss: 141.75
Play Entered on: 07/16/15
Originally listed on the Watch List: 07/12/15

Henry Schein, Inc. - HSIC - close: 144.83

Comments: 08/09/15:
The stock market's broad-based decline helped push HSIC back toward support in the $143-144 area. HSIC should rally from here but I would hesitate to launch new positions. Let's give it a week and see how the stock performs.

No new positions at this time.

Trade Description: July 12, 2015:
HSIC has been relatively resistant to the market's ups and downs lately. That's a good thing considering some of the recent volatility in stocks.

HSIC is in the services sector. They're part of the medical equipment industry.
According to the company, "Henry Schein, Inc. is the world's largest provider of health care products and services to office-based dental, animal health and medical practitioners. The Company also serves dental laboratories, government and institutional health care clinics, and other alternate care sites. A FORTUNE 500 Company and a member of the S&P 500 and NASDAQ 100 Indices, Henry Schein employs more than 18,000 Team Schein Members and serves more than one million customers.

The Company offers a comprehensive selection of products and services, including value-added solutions for operating efficient practices and delivering high-quality care. Henry Schein operates through a centralized and automated distribution network, with a selection of more than 100,000 branded products and Henry Schein private-brand products in stock, as well as more than 150,000 additional products available as special-order items. The Company also offers its customers exclusive, innovative technology solutions, including practice management software and e-commerce solutions, as well as a broad range of financial services.

Headquartered in Melville, N.Y., Henry Schein has operations or affiliates in 30 countries. The Company's sales reached a record $10.4 billion in 2014, and have grown at a compound annual rate of approximately 16 percent since Henry Schein became a public company in 1995.

HSIC has managed to beat Wall Street estimates the last couple of quarters. Revenue growth has been negatively impacted by foreign currency headwinds but they're still seeing growth. Analysts are only forecasting +3.3% revenue growth in 2015 but they expect that to almost double in 2016 to +6.4%.

Technically the stock looks bullish with a breakout from a major consolidation pattern back in June. The point & figure chart shows a quadruple top breakout buy signal with a $195.00 target.

Shares of HSIC have been churning sideways in the $142-146 range the last couple of weeks. If it can breakout we want to be ready. Tonight I am suggesting a trigger to buy calls if HSIC can close above $146.50.

Current Target: To Be Determined
Current Stop loss: 141.75
Play Entered on: 07/14/15
Originally listed on the Watch List: 07/12/15

iShares US Home Construction ETF - ITB - close: 27.48

Comments: 08/09/15:
Once again I'm starting to lose my patience with ITB. After a four-day rally the prior week this ETF reversed with a four-day decline. It managed a short-term oversold bounce on Friday.

No new positions at this time.

Earlier Comments: January 11, 2015:
The ITB is an exchange traded fund that mimics the Dow Jones U.S. Select Home Construction Index. The top 12 holdings are DHI, LEN, PHM, TOL, NVR, HD, TPH, LOW, RYL, SHW, KBH and MTH.

This index has been stuck in a trading range for years. That looks like it's about to change. Have you looked at a chart of the 10-year bond yield lately? Bond yields are going lower. That's going to pressure mortgage rates lower and that's bullish for home sales. This past week saw 30-year mortgage rates dip below 3.6%. That's a 19-month low.

If that wasn't enough of a tailwind President Obama wants to help. On January 7th the White House announced plans to reduce the government mortgage insurance premiums in an effort to boost home ownership. Another positive for the homebuilders is the U.S. Federal Reserve. We just had two fed governors come out last week saying they think the Fed should hold off on raising rates. The longer the Fed waits to start raising rates the better it will be for homebuilders.

Currently the ITB appears to be breaking out past major resistance and closed at multi-year highs. I'd like to see a little bit more follow through. Tonight I'm suggesting we wait for the ITB to close above $27.00 and then buy calls the next morning with a stop loss at $23.95.

08/02/15 new stop @ 26.75
07/12/15 new stop @ 25.90
06/28/15 last week new home sales surged to their best levels since early 2008
06/15/15 the NAHB confidence survey hits 9-month highs
05/31/15 the ITB is not performing well. Investors may want to consider an early exit.
03/01/15 new stop @ $25.45
02/11/15 trade begins. ITB opens at $27.09
02/10/15 ITB closes at $27.10, above our trigger at $27.00
Option Format: symbol-year-month-day-call-strike

Current Target: ITB @ TBD
Current Stop loss: 26.75
Play Entered on: 02/11/15
Originally listed on the Watch List: 01/11/15

MasterCard Inc. - MA - close: 97.77

Comments: 08/09/15:
MA managed to ignore some of the market's weakness last week. Shares consolidated sideways in the $96-99 zone, near its highs. Friday's bounce lifted shares back into positive territory for the week.

I'm encouraged by MA's performance last week so we are raising the stop loss from $89.75 to $91.75.

I am not suggesting new positions at this time.

Trade Description: May 3, 2015:
We are adding MA back to the watch list. Here's our recent watch list play description from April:

Do you have a credit card? How about a debit card? Odds are you do. About 70% of Americans have a credit card and many have more than one. Inside the United States there are over 500 million credit cards between American Express, MA, and Visa. There's more than 1.12 billion globally (not counting the U.S.). There's also another 572 million MA or Visa debit cards in the U.S. (MasterCard has more than 144 million). Not counting America there are more than 1.2 billion debit cards around the world.

Now what if you could charge a small percentage for consumers using their plastic every time they make a purchase? That's MA's business model. As of 2013 their market share of global transactions (credit or debit) was about 27%. They are the second biggest credit and debit card company behind Visa (V). According to the company, "MasterCard (MA), www.mastercard.com, is a technology company in the global payments industry. We operate the world's fastest payments processing network, connecting consumers, financial institutions, merchants, governments and businesses in more than 210 countries and territories. MasterCard's products and solutions make everyday commerce activities â€“ such as shopping, traveling, running a business and managing finances â€“ easier, more secure and more efficient for everyone."

MA has been delivering steady growth. They reported their Q3 results on October 30th with earnings up +19% from a year ago to $0.87 a share. That beat estimates. Revenues were up +12.8% to $2.5 billion, also above expectations. The bullish trend continued when MA reported its 2014 Q4 results on January 30th. Earnings per share soared +32% from a year ago to $0.69 and revenues grew +13.6% to $2.42 billion. Both metrics were above Wall Street expectations.

The company did warn that the surge in the U.S. dollar was impacting results but they still see strong single-digit revenue growth for 2015. They reaffirmed +20% earnings growth.

Meanwhile one of MA's biggest rivals, American Express (AXP), is not having a good year. AXP lost its exclusive deal with Costco (COST) last month. This deal generated 20% of AXP's loans and about 10% of their annual card growth. AXP is also losing its partnership with JetBlue (JBLU). AXP's losses will likely be MA's and Visa's gain.

Recently MA announced it had signed a 10-year deal with Citigroup. Not only is Citigroup one of the biggest banks on the planet they are the largest credit card issuer in the world. The press release states "Citi will begin aligning the company's consumer proprietary credit and debit portfolios to the MasterCard network in 2015." One analyst has already opined that the deal should provide a "decent tailwind for EPS growth" (for MA). Speaking of opinions, a couple of analysts at Nomura believe that MA is cheap at current valuations and could be seen as safe haven investment given their steady earnings growth.

"Despite a mixed global economy, we delivered solid results for the quarter and for the full year in 2014," said Ajay Banga, president and CEO, MasterCard. "This year is off to a good start with several new wins, as well as renewals of some important customer agreements, with more in the pipeline. Looking ahead, we will continue to be at the forefront of our industry by driving payment innovation with solutions such as MasterPass, and by increasing electronic payments usage globally as demonstrated by our significant expanded acceptance footprint across Africa."

Shares of MA look like a potential trade again. The company recently reported earnings on April 29th. The beat estimates on the bottom line with a profit of $0.89 per share. Revenues were only up +2.7% to $2.23 billion, which was below expectations. Part of the challenge were currency headwinds.

Wall Street seems to think that MA will do well in spite of the tough business environment. The spike higher on April 22nd was news that the country of China was going to open up their market to foreign companies. Previously companies like MA and Visa could only do business in China by partnering with a domestic firm (China UnionPay). Now the Chinese government is opening up the bank card-clearing market to foreigners. This is huge. The Chinese market for this business was $6.8 trillion in transactions last year. Now MA gets a chance to compete for its share of this business.

Shares of MA still have resistance near $93.00. We want to see MA close above $93.25 and then buy calls the next morning with a stop loss at $88.00.

Current Target: MA @ TBD
Current Stop loss: 91.75
Play Entered on: 05/11/15
Originally listed on the Watch List: 05/03/15

Microsoft Corp. - MSFT - close: 46.74

Comments: 08/09/15:
MSFT is another watch list candidate that graduated to our active play list.
The plan was to wait for MSFT to close in the $47.50-48.50 range and then buy calls the next morning. The stock's rally on Tuesday qualified with a close at $47.54. Our trade opened the next morning. MSFT was not immune to the market's weakness on Thursday but traders were in a buy-the-dip mood on Friday.

At this time I would wait for another close above $47.50 before considering new bullish positions.

Trade Description: August 2, 2015:
Microsoft is a technology titan. They were founded in 1975. Today they have grown into a behemoth in multiple industries.

A few of MSFT's businesses include: computer operating system software, Microsoft Office, Windows Phone operating system, Xbox gaming business, Xbox live subscriptions, Commercial software business includes Windows Server, Microsoft SQL server, Visual Studio, and more. They also own Skype. The company has jumped headfirst into cloud computing

This focus on cloud has changed the way MSFT now describes itself. According to the company, "Microsoft is the leading platform and productivity company for the mobile-first, cloud-first world, and its mission is to empower every person and every organization on the planet to achieve more."

The company has been getting a lot of press lately for its Windows 10 launch. The software went live on July 29th. MSFT is offering it for free to consumers who have Windows 7 or 8. In the first 24 hours over 14 million copies were downloaded. Reviews of the new operating system have been positive, many claiming it is a major upgrade from Windows 8.

Barron's recently published a bullish article on MSFT. The author suggested that MSFT is moving toward a subscription model. Adobe Systems (ADBE) has seen huge success moving from an upfront license fee for their software to a monthly subscription model. MSFT appears to be moving more and more toward this model. Although as I mentioned earlier you can download an upgrade to Windows 10 for free (currently available in 190 countries). The Barron's article also suggested that MSFT is cheap with a 2.7% dividend yield and trading at 16x trailing free cash flow vs. the S&P 500 average of 20x free cash flow.

MSFT's most recent earnings report was July 21st. It was the company's fiscal Q4 report. Earnings of $0.62 per share beat estimates of $0.57. Revenues were down -5% to $22.18 billion, but that was still above estimates. Currency headwinds were a big negative last quarter. Highlight was its commercial cloud computing revenues, which surged +88% (almost 100% if you account for currency headwinds).

MSFT management guided lower, which would normally be the kiss of death for the stock price. However, the reaction to their lowered guidance was minor. Shares of MSFT a couple of points and found support. That's in spite of a rough week for the market two weeks ago. Now investors are buying the dip and shares appear to have produced a tradable bottom. The point & figure chart is still bullish and forecasting at $67.00 target.

Tonight I am suggesting we buy calls on MSFT if the stock can close in the $47.50-48.50 range. Wait for the stock to close in this window and then buy calls the next morning. This is a long-term trade. We're using the 2017 calls.

Breakout trigger: Wait for MSFT to close in the $47.50-48.50 range
Then buy calls the next morning with a stop loss at $43.75.

Current Target: MSFT @ TBD
Current Stop loss: 43.75
Play Entered on: 08/05/15
Originally listed on the Watch List: 08/02/15

Nike, Inc. - NKE - close: 114.51

Comments: 08/09/15:
After nine up weeks in a row shares of NKE finally encountered some profit taking. Most of the pullback was thanks to the market sell-off on Thursday. NKE did pierce technical support at its rising 20-dma on Friday but managed to bounce and trim its loss by the closing bell.

I am worried the broader market could be poised for a decline and NKE remains overbought. Therefore tonight I am suggesting we exit half of our call position on Monday morning, August 10th, to lock in a potential gain. We will also raise our stop loss to $109.40.

I am not suggesting new positions at this time.

Earlier Comments: March 29, 2015:
In Greek mythology Nike is the winged goddess of victory.
It's an appropriate brand name for the American athletic wear giant.
Nike is the 800-pound gorilla in the industry with annual sales of more than $30 billion.

If you're not familiar with the company, "NIKE, Inc., based near Beaverton, Oregon, is the worldâ€™s leading designer, marketer and distributor of authentic athletic footwear, apparel, equipment and accessories for a wide variety of sports and fitness activities. Wholly-owned NIKE, Inc. subsidiaries include Converse Inc., which designs, markets and distributes athletic lifestyle footwear, apparel and accessories, and Hurley International LLC, which designs, markets and distributes surf and youth lifestyle footwear, apparel and accessories."

The company's most recent earnings report was March 19th, after the closing bell. NKE reported its Q3 2015 results. Analysts were expecting a profit of $0.84 a share on revenues of $7.62 billion. NKE delivered a profit of +0.89 a share or +16% from a year ago. Revenues were up +7% to $7.46 billion. However, if you back out the currency headwinds, their revenues were up +13%.

The company reported sales growth across every geographical region. Their gross margins improved 140 basis points to 45.9 percent. Management said their online sales are soaring. Nike.com saw its revenues jump +42% last quarter.

The current quarter is NKE's 2015 Q4 (March-July) and the company said orders for Q4 in North America are up +15%, which is above analysts' estimates of +11.6%. Orders from China are up +11%, also above estimates. In the company's earnings release NKE said, "As of the end of the quarter, worldwide futures orders for NIKE Brand athletic footwear and apparel scheduled for delivery from March 2015 through July 2015 were 2 percent higher than orders reported for the same period last year. Excluding currency changes, reported orders would have increased 11 percent."

One big concern is the U.S. dollar. Sales in Europe were up +21% but when you factor in euro weakness and dollar strength that sales growth drops to +10%. The strength in the U.S. dollar is a major headwind but after NKE's Q3 results Wall Street feels that the company is managing the currency impact very well. The company is forecasting low double digit sales growth in the current quarter.

Wall Street applauded the results and shares of NKE gapped open higher on March 20th to hit all-time highs. There was a parade of bullish analyst comments. Several firms raised their price target on NKE. Here's a brief list of new price target: $106, $110, $115, $116.00. The point & figure chart is more optimistic as it is forecasting at $125.00 target.

Shares of NKE have seen some profit taking, which isn't a surprise considering the market's recent decline. However, now that NKE has filled the gap, traders jumped in to buy the dip. The stock looks poised to breakout past round-number resistance at $100.00 (again).
Tonight I am suggesting investors wait for NIKE to close above $101.00 and then buy calls the next morning with a stop loss at $94.45.

08/09/15 new stop @ 109.40, Exit HALF of our position on Monday, Aug. 10th to lock in a potential gain
07/19/15 new stop @ 107.75
07/12/15 new stop @ 104.25
07/05/15 new stop @ 103.25
06/28/15 new stop @ 102.25
06/25/15 NKE beats earnings and revenue estimates
06/21/15 new stop @ 99.50
06/07/15 new stop @ 97.85
05/31/15 NKE down last week on rumors it might be involved in the FIFA scandal
05/11/15 trade begins. NKE opens at $102.42
05/08/15 Triggered with a close @ $102.44 (above 102.00)
05/03/15 move the stop loss from 95.75 to 97.45
04/12/15 Strategy update: adjust the trigger to a close above $102.00 and the stop loss to $95.75 (from a close above $101.00 and a stop at $94.45)
Option Format: symbol-year-month-day-call-strike

Current Target: NKE @ TBD
Current Stop loss: 109.40
Play Entered on: 05/11/15
Originally listed on the Watch List: 03/29/15

Starbucks Corp. - SBUX - close: 57.20

Comments: 08/09/15:
SBUX is actually hold up reasonably well. Shares only lost 73 cents for the week. That was all thanks to the market drop on Thursday. SBUX should have short-term support near $56.00 and again in the $54.00 area.

I am not suggesting new positions at this time.

Trade Description: April 26, 2015:
SBUX shares are soaring to new all-time highs.

The world seems to have an insatiable appetite for coffee. Starbucks is more than happy to help fill that need. The first Starbucks opened in Seattle back in 1971. Today they are a global brand with locations in 66 countries. SBUX operates more than 21,000 retail stores with more than 300,000 workers.

A few years ago Business Insider published some facts on SBUX. The average SBUX customer stops by six times a month. The really loyal, top 20% of customers, come in 16 times a month. There are nearly 90,000 potential drink combinations at your local Starbucks. The company spends more money on healthcare for its employees than it does on coffee beans.

The company's earnings results were only mediocre most of 2014 year. You can see the results in SBUX's long-term chart below. After incredible gains in 2013 SBUX has essentially consolidated sideways in 2014. The good news is that looks the consolidation is over.

Five-Year Plan

Late last year SBUX announced their five-year plan to increase profitability. Here's an excerpt from a company press release:

"The seismic shift in consumer behavior underway presents tremendous opportunity for businesses the world over that are prepared and positioned to seize it," Schultz said (Howard Schultz is the Founder, Chairman, President, and CEO of Starbucks). "Over the next five years, Starbucks will continue to lean into this new era by innovating in transformational ways across coffee, tea and retail, elevating our customer and partner experiences, continuing to extend our leadership position in digital and mobile technologies, and unlocking new markets, channels and formats around the world. Investing in our coffee, our people and the communities we serve will remain at our core as we continue to redefine the role and responsibility of a public company in today's disruptive global consumer, economic and retail environments."

"Starbucks business, operations and growth trajectory around the world have never been stronger, and we are more confident than ever in our ability to continue to drive significant growth and meet our long term financial targets," said Troy Alstead, Starbucks chief operating officer. "We have more customers visiting more stores more frequently, both in the U.S. and around the world, than at any time in our history. And we expect both the number of customers visiting our stores and the amount they spend with us to accelerate in the years ahead. With a robust pipeline of mobile commerce innovations that will drive transactions and unprecedented speed of service, Starbucks is ushering in a new era of customer convenience. We believe the runway of opportunity for Starbucks inside and outside of our stores is both vast and unmatched by any other retailer on the planet."

The company believes they can grow revenues from $16 billion in FY2014 to almost $30 billion by FY2019. To do that they will expand deeper into regions like China, Japan, India, and Brazil. SBUX expects to nearly double its stores in China to over 3,000 locations in the next five years

They're also working hard on their mobile ordering technology to speed up the experience so customers don't have to wait in line so long at their busiest locations. This will also include a delivery service.

Part of the five-year plan is a new marketing campaign called Starbucks Evening experience. The company wants to be the "third place" between home and work. After 4:00 p.m. they will start offering alcohol, mainly wine and beer, in addition to new tapas-like smaller plates.

The company recently launched its first ever Starbucks Reserve Roastery and Tasting Room in Seattle, near their iconic first retail store. The new roastery is supposed to be the ultimate coffee lovers experience. CEO Schultz said they will eventually open up about 100 of these Starbucks Reserve locations.

SBUX is having a pretty good 2015 so far with the stock up +26%, outperforming the broader market. A lot of this gain was thanks to a post-earnings pops. SBUX reported its Q1 2015 results on January 22nd. Adjusted earnings, backing out one-time charges, were $0.80 a share. That's in-line with estimates. Revenues were up +13.3% to $4.8 billion, also in-line with estimates.
It was a very strong holiday period for SBUX thanks in part to astonishing gift card sales. The amount of money loaded onto SBUX gift cards during the holidays surged +17% to a record $1.6 billion. One out of every seven Americans received a SBUX gift card. The company also saw significant growth overseas with its China and Asia-Pacific business soaring +85% to sales of $495 million. Their mobile transactions have reached seven million transactions a week.
Investors applauded the news anyway and sent SBUX soaring to new all-time highs the next day.

That whole scenario just happened again on Friday with the company delivering exceptional growth.
SBUX reported its Q2 (2015) on April 23rd. Earnings of $0.33 a share were in-line with estimates. Revenues were up +17.8% to $4.56 billion, slightly above expectations. It was their strongest growth in four years.
Customers are responding well to new drink options and an updated food menu. They're also developing new delivery options, mobile pay options, and alcoholic drinks available at select locations.

Worldwide same-store sales grew +7%. This was significantly above estimates. It also marked the 21st consecutive quarter where SBUX's comparable store sales were +5% or more.

The company issued mixed guidance. The stronger dollar is having an impact.
They see fiscal 2015 results in the $1.55-1.57 range. That compares to Wall Street estimates for $1.57 per share. However, the company's revenue estimates are more optimistic. They're forecasting +16-18% sales growth into the $19.1-19.4 billion zone compares to analysts' estimates of $19.1 billion.

The stock market applauded SBUX's results and shares popped to new highs. We do not want to chase it. Shares will likely fill the gap from Friday morning. Tonight I am suggesting a buy-the-dip trigger at $50.00. More nimble traders may want to consider a trigger closer to $49.70 instead.

Current Target: SBUX @ TBD
Current Stop loss: 53.75
Play Entered on: 04/28/15
Originally listed on the Watch List: 04/26/15

Under Armour, Inc. - UA - close: 97.93

Comments: 08/09/15:
UA had rallied to new all-time highs prior to Thursday's market-wide sell-off. Traders bought the dip on Friday but I am not convinced the pullback is over. If we had the 2017 calls I'd probably leave our stop loss pretty wide. However, we don't. We are using the January 2016 calls. Therefore tonight we'll raise the stop loss to $93.25, just below the intraday low from its gap higher on July 23rd.

No new positions at this time.

Trade Description: June 14, 2015:
UA is in the consumer goods sector. They make shoes and athletic wear. According to the company, "Under Armour (UA), the originator of performance footwear, apparel and equipment, revolutionized how athletes across the world dress. Designed to make all athletes better, the brand's innovative products are sold worldwide to athletes at all levels. The Under Armour Connected Fitness platform powers the world's largest digital health and fitness community through a suite of applications: UA Record, MapMyFitness, Endomondo and MyFitnessPal."

The athletic shoe and athletic apparel business is very competitive. Nike (NKE) has dominated the space for years. UA is about 10% the size of NKE but it's actively fighting for market share and recently overtook Adidas as the second biggest athletic wear brand inside the United States. Nike had sales of $27.8 billion in 2014. UA is a fraction of that with 2014 sales of $3.08 billion but they saw growth of +32%.

UA has been firing on all cylinders with its earnings results. Most of last year saw the company not only beating Wall Street's estimates but also raising guidance.
UA reported their 2014 Q4 results on February 4th.
The company reported a profit of $0.40 a share with revenues climbing +31% to $895 million, which was above estimates for $849 million. UA's CEO Kevin Plank, in a recent interview, said his company will grow at 20%-plus in 2015. The company's current estimates are $3.76 billion in sales for the year.

There was a steady stream of analysts raising their price targets on UA after its February earnings report. The company's most recent earnings report was April 21st when UA announced Q1 results. After raising guidance back in February the company reported earnings of $0.05 per share, which was in-line with Wall Street's new estimates. Revenues were up +25.4% to $804.9 million, which beat expectations.

UA management raised their outlook again. They expect 2015 operating income to improve +13-to-15%. UA expects 2015 revenues to rise +23% to $3.78 billion. The stock has rallied sharply into its earnings report and shares suffered some post-earnings depression with a -$12.00 drop (-13.6%) in the next two weeks. The price target upgrades continued but UA spent most of May consolidating sideways inside a narrow range. Finally on June 5th shares of UA broke out past multiple layers of resistance on another upgrade. The stock was upgraded to a "buy" with a $91 price target. Since then UA has been digesting its gains in a sideways consolidation between what should be support at $80 and short-term resistance near $82.00.

Tonight I am suggesting we wait for UA to close above $82.25 and then buy calls the next morning with a stop loss at $75.90.

FYI: I am listing the 2016 calls but investors may want to consider the 2017 January calls if you're willing to pay for the time premium.

Current Target: UA @ TBD
Current Stop loss: 93.25
Play Entered on: 06/17/15
Originally listed on the Watch List: 06/14/15

CLOSED Plays

Apple Inc. - AAPL - close: 115.52

Comments: 08/09/15:
The profit taking in AAPL continued last week and shares broke down below major support in the $120.00 area. AAPL hit our stop loss at $118.00 on August 3rd (Monday).

The research team at Bespoke Investment noted that AAPL is having its longest correction (165 days as of Friday) since Steve Jobs introduced the iPod in October 2001. They are looking at AAPL's all-time closing high of $133.00 in February 2015. Shares have gotten close to this level and traded above it on an intraday basis.

There has been plenty of speculation on where AAPL will find a bottom. Last week I heard a lot of talk about maybe the $105.00 area.

08/03/15 stopped out @ 118.00
07/22/15 Big gap down as the market reacts to AAPL's earnings
06/20/15 AAPL underperformed the broader market this past week. Shares look like they could break support in the $125 area
04/27/15 AAPL crushes earnings estimates (again)
04/12/15 new stop @ 118.00
03/01/15 Caution: AAPL could be poised for a pullback. Consider taking profits now and then re-enter this trade later.
02/22/15 new stop @ 114.00
02/15/15 new stop @ 109.50
12/09/14 triggered on gap down at $110.19, trigger was $111.00
11/30/14 raise the buy-the-dip entry trigger to $111.00
11/16/14 raise the buy-the-dip entry trigger to $108.00
Adjust the strike price to the 2016 Jan $120 call.
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 118.00
Play Entered on: 12/09/14
Originally listed on the Watch List: 11/02/14

The Walt Disney Co. - DIS - close: 109.35

Comments: 08/09/15:
It was an ugly week for shares of DIS. Shares fell more than $10.00 for the week, erasing about three month's worth of gains. The big move was a reaction to DIS' earnings report.

DIS reported their Q3 earnings on August 4th. Wall Street was expecting a profit of $1.42 per share on revenues of $13.2 billion. DIS delivered a profit of $1.45 per share. Revenues were up +5% to $13.1 billion - a miss.

This is a huge company firing on all cylinders. Yet the market freaked out over some small subscriber losses in DIS' ESPN cable TV unit. Shares gapped open lower at $110.83 on August 5th. That immediately triggered this play since we had DIS on the watch list with a buy-the-dip trigger at $113.55.
It looked like a great entry point.

Now the bad news. DIS' big drop crushed the major media stocks on Wednesday. On Thursday shares of Viacom (VIAB) were hit on similar fears about cable customers cutting their subscriptions and moving to more streaming services (like Netflix). Both VIAB and DIS spiked lower again on Thursday. Shares of DIS fell toward technical support at its 200-dma near $104 (the intraday low was 104.24). Our brand new call play on DIS was stopped out at $107.00.

I am still long-term bullish on DIS but the volatility this past week was extreme. I'm suggesting we give DIS some space and let the dust settle. We can re-evaluate the stock again in a few weeks.

08/06/15 stopped out at $107.00
08/05/15 triggered on gap down at $110.83
07/12/15 adjust the trigger to $113.55
07/05/15 move the trigger to $112.00
Option Format: symbol-year-month-day-call-strike

Chart

Current Target: To Be Determined
Current Stop loss: 107.00
Play Entered on: 08/05/15
Originally listed on the Watch List: 06/21/15

Lions Gate Entertainment - LGF - close: 37.61

Comments: 08/09/15:
I was expecting LGF's earnings report to be a risk for our trade. Instead it was the widespread market decline that killed our LGF play.

As of July 31st the stock was at all-time highs. Shares reversed into a four-day slide that accelerated on Thursday with a plunge to $34.63. The broader market experienced a sharp sell-off on Thursday so the move in LGF was probably exaggerated. Our stop loss was hit at $34.65. I found it interesting that traders bought the dip in LGF at $34.63 three times on Thursday.

On Thursday night LGF reported earnings.
LGF beat estimates by 19 cents with a profit of $0.31 per share. Yet revenues were down -9.0% to $408.9 million, which was below estimates.
Investors ignored the revenue miss and bought LGF on Friday with shares rebounding +6.4%.

Our play has been stopped out but readers may want to keep LGF on their radar screen for a few days and see how it performs once this volatility cools off.

New Watch List Candidates:

One of the strongest stock performances this year belongs to Ambarella (AMBA). After a -10% correction from its recent highs the stock is still up +126% year to date. Investors believe the future is bright for this video-chip maker.

AMBA is in the technology sector. They're considered part of the semiconductor and semiconductor equipment makers. The company was founded in 2004 and went public in October 2012 at $6.00 a share. That price was significantly below where AMBA was expected to price in the $9-11 range. Investor sentiment has definitely changed since then.

The company has grown from making broadcast-class encoders to making consumer and sports cameras, security cameras, and now automotive cameras. Their high-definition chips are being integrated into security IP cameras and wearable cameras. AMBA is also capturing part of a new market - cameras on consumer-level remote control drones.

The last two plus years have seen a strong performance in AMBA with the stock up more than +600% from its IPO price. AMBA has GoPro, Inc. (GPRO) to thank for part of that rally. When GPRO held its IPO last year (2014) it drew attention to AMBA who makes the chips for the video processing in GPRO's cameras.
Shares of GPRO saw a huge decline 2014 highs but shares of AMBA have continued to rally.

Part of GPRO's trouble is competition from a large Chinese rival - Xiaomi. GPRO is currently seen as best of breed in the action camera market but it may not hold that spot forever. Xiaomi is selling similar cameras at a significant discount to GPRO and both cameras use AMBA's technology. Both camera makers have different models. GPRO's top of the line still has better components than Xiaomi's - at least for now. The real winner is AMBA since they supply to both companies.
Multiple analysts have commented on AMBA's relationship with Xiaomi and believe it will bear significant fruit in the future.

AMBA has been killing it on the earnings front. They have beaten Wall Street's earnings and revenue estimates for the last six quarters in a row. Their
Q4 results came out on March 3rd. Analysts were expecting a profit of $0.49 a share on revenues of $59.3 million. AMBA delivered $0.68 a share with revenues soaring +61% to $64.7 million.

The company beat estimates again when they reported their Q1 (2016) results on June 2nd. AMBA's earnings were $0.71 per share, 13 cents above estimates. Revenues soared +73.6% to $71 million, also better than expected. Gross margins improved 210 basis points to 64.8%.

The stock seemed bullet proof until a negative analyst report surfaced in mid June claiming that AMBA's valuations are ridiculous. The analyst suggested their 120-month (10-year) price target for AMBA was $60. At the time this report came out AMBA was trading near $127. The stock collapsed to $93.00 in two days but since then traders have been buying the dips.

Valuations on high-growth names almost always look ridiculous, especially when there is so much money looking for a winner in the stock market. We think AMBA continues higher but I am labeling this an aggressive, higher-risk trade.

Shares of AMBA have been hovering in the $110-115 zone the last few days. It looks like $110 is new support. Tonight I am suggesting we wait for AMBA to close above $118.00 and then buy calls the next morning with a stop loss at $109.00. The $129-130 area is resistance but we're expecting a breakout higher.

Please note AMBA will likely report earnings in the first half of September. If they miss or guide lower the stock could get crushed. More conservative traders may want to wait until after we see the reaction to earnings before considering new positions here.

Wait for AMBA to close above $118.00
Then buy calls the next morning with a stop at $109.00

Love them or hate them the biotech stocks get a lot of attention. Investors are always looking for the next big thing. When the right biotech story comes along these stocks can sprint higher. Unfortunately a lot of the smaller biotech stocks are binary trades. You either win big or lose big. There is no middle ground. Instead of rolling the dice on a smaller biotech you could choose an established company with real revenues like CELG.

According to their press release, "Celgene Corporation, headquartered in Summit, New Jersey, is an integrated global biopharmaceutical company engaged primarily in the discovery, development and commercialization of novel therapies for the treatment of cancer and inflammatory diseases through gene and protein regulation."

What makes CELG so attractive is the company's pipeline. Developing drugs is an expensive business. A lot of older firms are buying other companies for their pipeline. Meanwhile CELG is developing a very strong pipeline. You can view the company's current progress
on this webpage.

Earnings results have generally been strong although there was a hiccup earlier this year. Looking at CELG's recent earnings history they beat estimates on both the top and bottom line last October and management guided higher. Then in January 2015 CELG issued a positive earnings warning and guided higher two weeks before their next report. When they did report in late January CELG still beat estimates on the bottom line.

On April 30th CELG beat estimates again but their revenue number came in below estimates. That's because analysts were expecting revenues to be better than the +20% growth CELG reported with sales of $2.08 billion. Management also guided lower and the stock plunged toward technical support at its 200-dma. That proved to be a buying opportunity as CELG rallied off its moving average a few days later.

In mid July CELG issued another positive earnings surprise two weeks before its scheduled announcement. The stock soared (gapped higher) on this news. When they reported their Q2 results on July 23rd CELG still beat estimates by two cents. Revenues were up +21.6% to $2.28 billion.

According to Investors.com, CELG's long-term forecasts suggest sales and profits will grow at strong double-digit percentages through 2019. According to analyst firm Piper Jaffray, CELG is "positioned to be the next major mover among the large-cap biotech stocks." Out of seventeen analysts, the median price target on CELG is $155.00. Currently the highest estimate is $190. The point & figure chart is forecasting a long-term target of $201.00.

This past week traders were selling biotech stocks. CELG followed them lower and is now more than $10.00 off its closing high. I suspect this correction continues and we want to be ready to take advantage of the pullback.

Broken support near $120-121 should be support. Tonight we are suggesting an intraday, buy-the-dip trigger at $121.00. If triggered we will start with a stop loss at $114.75.

We recently had STZ on our watch list but the trade never opened. Shares were stuck in a trading range from $115 to $122. STZ has finally broken out and we are adding it back to the watch list.

Here's my previous play description:
Major beer brands have suffered from the boom in craft beers. Yet STZ's Corona and Modelo have seen significant growth, especially in the U.S. The company's earnings and revenue growth has fueled a rally in the stock that has outpaced the major marker indices.

STZ is in the consumer goods sector. According to the company,
"Constellation Brands (NYSE:STZ and STZ.B) is a leading international producer and marketer of beer, wine and spirits with operations in the U.S., Canada, Mexico, New Zealand and Italy. In 2014, Constellation was one of the top performing stocks in the S&P 500 Consumer Staples Index. Constellation is the number three beer company in the U.S. with high-end, iconic imported brands including Corona Extra, Corona Light, Modelo Especial, Negra Modelo and Pacifico. Constellation is also the world`s leader in premium wine, selling great brands that people love including Robert Mondavi, Clos du Bois, Kim Crawford, Rex Goliath, Mark West, Franciscan Estate, Ruffino and Jackson-Triggs. The company`s premium spirits brands include SVEDKA Vodka and Black Velvet Canadian Whisky.

Based in Victor, N.Y., the company believes that industry leadership involves a commitment to brand-building, our trade partners, the environment, our investors and to consumers around the world who choose our products when celebrating big moments or enjoying quiet ones. Founded in 1945, Constellation has grown to become a significant player in the beverage alcohol industry with more than 100 brands in its portfolio, sales in approximately 100 countries, about 40 facilities and approximately 7,200 talented employees."

This past January STZ reported their fiscal year 2015 Q3 results that beat analysts' estimates on both the top and bottom line. Management raised their 2015 guidance. Their Q4 results were announced on April 9th. Earnings were up +37% from a year ago to $1.03 per share. That was 9 cents above estimates. Revenues were up +5% to $1.35 billion. Gross margins improved to 44%.

STZ said they're seeing strong demand for their Mexican beer brands Corona and Modelo. They're gaining market share in both the spirits and wine categories as well.

The company said 2015 sales were up +24% from the prior year to $6.03 billion. STZ's management guided in-line for fiscal 2016 and forecast earnings of $4.70 to $4.90 per share. That compares to 2015's profit of $4.17 per share (essentially +12% to +17.5% earnings growth).

STZ's most recent report was July 1st. Wall Street was looking for a profit of $1.24 per share on revenues of $1.62 billion. STZ beat estimates with a profit of $1.26 per share. Sales were up +6.9% to $1.63 billion. If you account for currency headwinds their revenues were up +8%. Management raised their fiscal year 2016 earnings guidance from $4.70-4.90 to $4.80-5.00.

After languishing near the bottom half of its trading range for the majority of July shares of STZ finally resumed its long-term up trend. The stock has recently broken out past major resistance near $122.00. Tonight I am suggesting a buy-the-dip trigger at $122.00 since broken resistance should be new support.

The world is moving closer and closer to a cash-less society. Big payment processing companies like Visa and MasterCard will benefit from this transition.

According to the company, "Visa Inc. (NYSE:V) is a global payments technology company that connects consumers, businesses, financial institutions, and governments in more than 200 countries and territories to fast, secure and reliable electronic payments. We operate one of the world's most advanced processing networks - VisaNet - that is capable of handling more than 56,000 transaction messages a second, with fraud protection for consumers and assured payment for merchants. Visa is not a bank and does not issue cards, extend credit or set rates and fees for consumers. Visa's innovations, however, enable its financial institution customers to offer consumers more choices: pay now with debit, pay ahead of time with prepaid or pay later with credit products."

It's important to note that V does not extend credit to consumers. There's no credit risk for bad loans here. V makes money on transactions. That business is booming.

On July 23rd V report its Q3 results, which were $0.74 per share. That beat estimates by 16 cents. Revenues were also higher than expected at $3.52 billion, up +11.5%. Management offered strong guidance and upped their EPS estimates into the mid teen percentage range. Long-term V is expected to grow earnings at almost 15%.

One of the big stories to come out of V's recent earnings report was news of a merger brewing. Visa is talking to former subsidiary Visa Europe. Estimates suggest the price target could be in the $15-20 billion range. Wall Street is positive on the deal and Visa expects it would add to earnings in fiscal 2017.

Another reason to be bullish on Visa is the fact that China recently opened its market to foreign companies to participate in clearing domestic bank card transactions. Previously only Chinese companies could do this. Now giants like V and MasterCard can compete in a market valued at more than $6.8 trillion. Considering V's expertise in this field we should expect them to grab a healthy chunk of the market.

Shares of V recently surged to new all-time highs and traded above $76 per share. After four up weeks in a row V posted a loss last week. Technically it produced a bearish engulfing candlestick reversal pattern on its weekly chart. If shares do correct lower we want to take advantage of the pullback. Broken support near $70.00 should be support. Tonight we are suggesting a buy-the-dip trigger at $70.50.

Buy-the-dip Trigger at $70.50, start with a stop at $66.25

BUY the 2017 Jan $80 call (V170120C80) current ask $5.80

Option Format: symbol-year-month-day-call-strike

Chart of V:

Originally listed on the Watch List: 08/09/15

Active Watch List Candidates:

The Clorox Company - CLX - close: 118.21

Comments: 08/09/15:
I was expecting CLX to breakout higher but I was not expecting a four-day run from $112 to almost $120.

The speed in which CLX rallied last week was too fast and our trade did not open.
The plan was to wait for CLX to close in the $112.75-114.00 range. That never happened. On Monday CLX surged to $115.00 and only started to pullback on Friday.

So our play was not triggered and tonight I'm removing CLX as a candidate. It's probably worth adding CLX back to your radar screen. The $112-113 area should be support so a bounce in this area might be a new bullish entry point.

Trade did not open.

08/09/15 removed from the newsletter, suggested entry was a close in the $112.75-114.00 range.